Consumerism | - Part 3

Retail Sales Surge on Spring Thaw

The Commerce Department reported(.pdf) that U.S. retail sales jumped 1.1 percent in March, the biggest monthly increase since September 2012, as Americans released pent-up demand that resulted from an unusually harsh winter.

Last month’s gain was slightly above elevated estimates, exceeding the level of spending last November before the bad weather set in, and the February data was revised upward, from a gain of 0.3 percent to 0.7 percent, all signs of improving underlying demand.

Auto sales drove the overall increase in spending with a 3.1 percent boost last month, this following an upwardly revised gain of 2.5 percent the month prior. Excluding motor vehicles, sales rose 0.7 percent after a gain of 0.3 percent in February.

Gasoline station sales actually dropped 1.3 percent (though they’ll be going back up next month based on recent price increases) and, excluding both autos and gasoline, retail sales rose 1.0 percent.


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Sentiment Rises, Stocks Fall

Right up until the chart below was prepared, it seemed the key point of this post was going to be that consumer sentiment is holding steady near some its best post-recession levels, but, in looking at the curve below it seems more important to ask what all the hubbub is about in the stock market that, according to some, is in some kind of death spiral.

Anyway, the American mood remained near its best levels since the 2008 recession as the Reuters/University of Michigan consumer sentiment index rose from a final March reading of 80.0 to 82.6 in the first of two readings for April.

This is consistent with other recent measures of consumer confidence and, for this index, marks the highest level since last July. While the full-month reading for April could move lower when it is reported in two weeks, it is worth noting that sentiment was higher in only four other months going back more than six years. The expectations component rose from 70.0 to 73.3 and current conditions improved from 95.7 to 97.1.

Survey director Richard Curtin commented, “Economic news reaching consumers grew more favorable in early April. Net reports on changes in employment were more favorable, and negative mentions about current economic policies eased.”

Rising gasoline prices have yet to have a signicant impact on inflation expectations as the one-year outlook for overall price increases actually fell from 3.2 percent to 3.1 percent while the five-year outlook moved up only slightly from 2.9 percent to 3.0 percent.

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Confidence Begins to Fade

Confirming what was seen in this item earlier in the week via the latest weekly economic confidence survey from Gallup, the mood of the American consumer appears to be fading as a harsh winter gives way to spring, at least according to the latest reading on consumer sentiment from Reuters and the University of Michigan.

In the first of two readings for March, the index fell from 81.6 in February to 79.9 this month, its lowest level in almost a year, save for the most recent episode of the government shooting itself in the foot again last fall via a partial shutdown.

As was the case for the Gallup survey, the overall decline was driven by reduced expectations about the future as this component dropped from 72.7 to 69.4, its lowest level since November. The current conditions component actually rose, from 95.4 to 96.1, as Americans were more confident about their personal finances.

In a testament to the Federal Reserve’s ongoing effort to inflate asset prices, the fewest share of homeowners since 2007 said their homes had lost value over the last year, though respondents said home price gains would slow in the year ahead.

Fear of inflation is still nowhere to be seen as the one-year outlook puts prices 3.2 percent higher while inflation five years from now is seen coming in at a rate of just 2.9 percent.

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Retail Sales Rise More than Expected

The Commerce Department reported(.pdf) that U.S. retail sales rose for the first time in three months, up 0.3 percent in February after downwardly revised declines of 0.3 percent in December and 0.6 percent in January. Revisions to data for prior months totaled -0.4 percentage points, making the February improvement a bit less than what meets the eye.

Bad winter weather was once again cited as a key factor in this report and it is unlikely that there will be a clear picture of the underlying health of this component of consumer spending in the U.S. until late in the spring, after the expected bounce-back from the steepest retail sales decline in two years.

February Retail Sales

Gains were broad-based as nine of the 13 major categories saw higher sales. Excluding motor vehicles, sales rose 0.3 percent after dropping 0.3 percent in January and receipts were also 0.3 percent higher when excluding both autos and gasoline, a big improvement from the 0.5 percent decline for this group the month before.

February sales gains were paced by increased buying at sporting goods, hobby, book & music stores (+2.5%), health & personal care stores (+1.2%), and nonstore (online) retailers (+1.2%), all of the categories perhaps benefiting from the harsh winter weather (think boots, cold remedies, and shopping at home).

Sales declines included miscellaneous store retailers (-0.9%), general merchandise (-0.3%), and both electronics and grocery stores (-0.2%).

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